UK Inflation Falls to 2.8% in February

UK inflation unexpectedly fell to 2.8% in February, down from 3.0% in January, driven primarily by discounts in clothing and shoes, marking the first decline in these categories in over three years. This easing of inflation may provide relief to Chancellor Rachel Reeves ahead of her upcoming spring statement, despite the overall cost of living remaining above the Bank of England's target. Analysts caution that inflation could rise again next month due to planned tax increases and price resets. The decline has also heightened expectations for a potential interest rate cut by the Bank of England in May, with market probabilities for such a cut rising to 55%. Core inflation, however, remained persistent at 3.5%, signaling ongoing inflationary pressures in the services sector. Economists predict that upcoming fiscal measures may be necessary to address the broader economic challenges ahead.